BIZ-STUDY-RBI POLICY

With softer retail and wholesale

price-based inflation, Reserve Bank of India is likely to

change its policy stance from 'neutral' from 'calibrated

tightening' in the February policy, says a report.

The inflation based on the Consumer Price Index (CPI)

eased to an 18-month low of 2.19 per cent in December compared

to 2.33 per cent in November and 5.21 per cent in

December 2017.

The Wholesale Price Index (WPI)-based inflation also

eased to a eigth-month low of 3.80 per cent in December 2018,

as against 4.64 per cent in November 2018, and 3.58 per cent

in December 2017.

This is the fifth consecutive month that the CPI

reading has been below the RBI's target of 4 per cent.

"Benign headline inflation to provide a dovish tilt to

monetary policy committee (MPC). Softer December CPI and WPI

prints of 2.2 per cent and 3.8 per cent, respectively reaffirm

our belief that the MPC will adopt a more dovish tone in the

February meeting and change its stance to neutral from

calibrated tightening," according to a Kotak

research report.

RBI will announce it's sixth bi-monthly monetary

policy on February 7. The report expects CPI at around 3.3 per

cent in March 2019.

It said concerns, however, remain about the stickiness

of core inflation, especially at a time when growth is

expected is slow to 6.6 per cent in the second half of FY19.

"While volatile crude oil prices and concerns on

fiscal slippage may warrant some caution, the seemingly

structurally benign food inflation along with softening growth

should help in capping the upside pressures," it said.

The report expect a 50 basis points of rate cut in the

first half of 2019.

In the previous monetary policy announced in December,

RBI kept the repo rate unchanged at 6.5 per cent.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)